How are you helping your clients to avoid being underfunded in retirement?

Frank Armstrong
President, Founder
Investor Solutions
Miami

There are a few critical steps in assessing clients’ abilities to adequately fund their retirements, says Frank Armstrong. The first is an inventory of assets. The second is an evaluation of living expenses based on the lifestyle the retirees want to maintain.
“Some people may want 60% of their current income, and that may not be reasonable,” he says. “Some don’t want to get by with less and will happily continue to work to support their lifestyle.”

Once Armstrong helps clients determine living costs at today’s dollar, he inflates that by 4% and then determines the number of years it will take them to get to their target for retirement. “Of course, the wild card is health insurance and long-term care,” he says. Those who retire before 65 will have a gap before Medicare kicks in, and even then, he says, they may want to consider a health insurance supplement, which needs to be factored into living costs. They may also want to buy a long-term care policy. “If you don’t have the capital or insurance to withstand a few years in a long-term care facility, it can be devastating,” he says.

Armstrong advocates a glide-slope approach to saving: Early in your career, a portfolio should be heavily weighted toward global equities. Later, scale back on equities. “You want to make sure the day you retire is not dependent on what the market did yesterday,” he says. At about 55, Armstrong recommends a shift toward more fixed income, short-term diversified quality bonds. “You’re not looking for the highest yield possible but rather rock solid returns.” If you’re concerned about being underfunded, he says, you could delay shifting from equities for a few years. The ideal retirement portfolio, he believes, is 60% stocks and 40% bonds.

Armstrong suggests waiting until 70 to tap Social Security, when the payout is highest. “There are few places to put your money that you are guaranteed 8%, plus cost of living,” he says. If delaying is not an option, “taking it sooner may not be the worst thing in the world,” he says.

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-- Bob Doyle, President, CIO, Doyle Wealth Management
-- Christina Doss, Managing Director for Private Wealth Management, North Florida SunTrust Private Wealth Management, Jacksonville

Tags: Banking & Finance, Wealth Management